Natural gas inventories are expected to reach 3,781 Bcf by the end of October, with storage facilities fat from a net injection of 2,310 Bcf, the fourth-highest injection season on record, according to a projection by the Energy Information Administration (EIA).
That end-of-injection season total would be slightly below the five-year average, the agency said in its latest Short-Term Energy and Summer Fuels Outlook. Last week, EIA reported a storage decrease of 18 Bcf for the week ended March 27, leaving inventories at 1,461 Bcf, which is 628 Bcf greater than last year and 190 Bcf below the five-year average (see Daily GPI, April 2).
"Although this year's winter was colder than normal, it was slightly warmer than last year's historically cold winter...Strong projected electric power consumption of natural gas this summer are expected to keep injections below last year's refill, but the expected 2,310 Bcf refill is still significant compared with past years," EIA said Tuesday.
Henry Hub natural gas spot prices are likely to average $3.07/MMBtu this year (unchanged from EIA's previous forecast (see Shale Daily, March 11) and $3.45/MMBtu next year (a three-cent increase), according to EIA.
Henry Hub prices averaged $2.83/MMBtu last month, down 4 cents from February, and are expected to remain below $3.00/MMBtu through May, the agency said. Natural gas futures prices for July 2015 delivery (for the five-day period ending April 2) averaged $2.76/MMBtu. Current options and futures prices imply that market participants place the lower and upper bounds for the 95% confidence interval for July 2015 contracts at $1.90/MMBtu and $4.00/MMBtu, respectively. At this time last year, the natural gas futures contract for July 2014 averaged $4.46/MMBtu and the corresponding lower and upper limits of the 95% confidence interval were $3.40/MMBtu and $5.87/MMBtu, EIA said.
The agency expects natural gas marketed production to increase 3.8 Bcf/d (5.0%) this year and 1.5 Bcf/d (1.9%) next year, reflecting continuing production growth in the Lower 48, which the agency said would more than offset long-term declining production in the Gulf of Mexico. "With most growth expected to come from the Marcellus Shale, a backlog of drilled but uncompleted wells will continue to support production growth, as new pipelines come online in the Northeast," EIA said.
Increasing domestic gas production is expected to reduce demand for imports from Canada and support increased exports to Mexico, particularly from the Eagle Ford Shale.
"Liquefied natural gas [LNG] imports have fallen over the past five years because higher prices in Europe and Asia are more attractive to LNG exporters than the relatively low prices in the United States," EIA said. The agency expects LNG gross imports to average 0.2 Bcf/d in both 2015 and 2016, while LNG gross exports are forecast to increase from an average of 0.04 Bcf/d in 2014 to almost 0.8 Bcf/d in 2016.
EIA expects total natural gas consumption to average 76.3 Bcf/d in 2015, up from an estimated 73.5 Bcf/d in 2014, and to slip to 75.8 Bcf/d in 2016. "Consumption growth is largely driven by demand in the industrial and electric power sectors, while residential and commercial consumption are projected to decline in 2015 and 2016," EIA said. Natural gas consumption in the power sector is expected to increase by 11.5% this year and then fall by 2.2% in 2016. Industrial sector consumption is projected to increase by 4.9% and 2.5% in 2015 and 2016, respectively, as new industrial projects come online, particularly in the fertilizer and chemicals sectors and as industrial consumers take advantage of low natural gas prices.